If you find yourself needing a credit card or perhaps you’re paying too much money to have your current one, then perhaps learning about how you can avoid giving them more money will align with your money saving efforts. The fine print is where all the bullying happens and that’s especially so with credit card companies.
Tempting offers that seem legit rope us in, but it’s the iota within the fine print that can cost you hundreds of dollars. If you are looking to change credit card, pay your current one off as quickly as possible or simply have the desire to educate yourself more, this article will highlight some of the most important elements to be aware of before choosing a card.
Complicated Interest Rates
We all know credit card companies have complicated ways of charging interest, two cards for example might have the same interest rate, but one will cost more than the other due to the way it’s calculated. Choice consumer group mentioned in a recent article that most companies charge daily interest all the way back to the initial transactions. This means that you could be charged retrospective daily interest on all transactions from up to 55 days previous, not only on the arrears.
If your credit card bill is $3,000 and you repay $2,900 on time, most credit card companies will charge interest on the full $3,000, backdated for 55 days, not the $100 in arrears.
The only way to avoid this trick plus others such as the company cancelling your free interest period if you don’t pay your bill on time, is to always pay your debt as per the schedule.
We can all guess that we’ll be charged a late fee if we don’t repay on time, but it’s the less obvious charges that catch the majority of us out. Beware of balance transfer fees because they are used to lure customers into a bad deal. A balance transfer with 0% interest for example sounds ok, but the card could have poor value in terms of fees and standard interest.
Certain companies or cards will also include annual fees, especially if it’s a rewards card. Generally the first year will be free but then those fees will kick in just for you having the card within the second year and beyond. Finally, it goes without saying that credit cards carry expensive fees when foreign transactions and conversion rates factor in and avoiding them can save money with such a satisfying feeling.
0% Deferred Interest
The ‘deferred interest’ trick draws on the ‘0% introductory annual percentage rate’, but with the latter you pay zero interest during a set amount of time, generally between 6 – 18 months. Beyond this time the remaining balance is charged at the card’s regular interest rate so if you’re heavily overdrawn on your card it can suddenly become much more costly over night.
Deferred interest is practically the same the only difference is that if you don’t pay off your balance after the introductory period, then you’re charged interest retroactively at standard rates. In layman’s terms this means if you have $1 unpaid after a free six month period, then come day one, month seven you will be charged interest on that $1 for the full six month period.
Whatever the reason for taking out a new card, read the fine print on interest before signing your name, because if you plan on carrying a balance on the card, costs can shoot up especially after introductory periods end.
This is a big bonus area for credit cards and with many deals and discounts available it sometimes makes a particular card a better choice. However, again the fine print can make this travel rewards less rewarding such as the following:
- No Cancellations: Across the majority of credit card companies, if you cancel or try to rebook your flight, they disqualify your points altogether.
- Companion tickets: To qualify in some cases you have to by more expensive tickets e.g. unrestricted economy class ticket. This forces you to spend more on an upgraded flight.
- Fees don’t Equal Rewards: fuel surcharges is one example that isn’t included within rewards travel, and some laws even sometimes prohibit them.
If you would like more information about what kind of value you can receive from your frequent flyer points, look out for our infographic coming next Monday on the Buckscoop blog.
Terminating your Card
When you terminate your card don’t forget about residual interest/finance charges, because this is where you can get caught out. American Express woman Mona Hamouly said, “do not stop making payments after the account is cancelled. Payments must continue to be made by the payment due date each month until the balance is paid in full.”
If this isn’t done, you can end up with monster unpaid bills and a damaged credit rating. To avoid this, request a letter form your card company confirming that the account was closed at your request, not theirs. Additionally to this, also keep hold of your last statement stating your paid off your balance in full, because sometimes the those credit card companies make mistakes and try to charge you again.